Rocket Lab (RKLB) reported results for Q4 2024, with a significant revenue increase as it doubled its performance year-over-year, surpassing analysts’ consensus projections. While the company faced increased expense challenges, it displayed solid growth, primarily due to the successful launch and contract strategy. However, despite Q4 revenue surpassing consensus, Rocket Lab’s Q1 guidance was below consensus, indicating a return to regular launch and space systems levels after a strong quarter.
Strong Results but Lowered Forward Guidance
Rocket Lab provides essential launch services to commercial and government clients in the space industry. The company has recently shifted its focus to broaden its space system capabilities and boost the frequency of its electron launches. As a result, its Space Systems division is becoming a substantial part of its growth strategy with prime emphasis on satellite development and the introduction of Neutron, a forthcoming medium-lift launch vehicle for diverse payload capacities. While the Neutron project faces delays, it is still anticipated to be a significant catalyst that will tap into a larger total addressable market.
The company has made recent advances toward vertical integration to reduce costs and enhance efficiency. Developing key technologies internally improves operational performance, simplifies production, and could help expand margins.
Rocket Lab delivered a strong performance in Q4 2024, outperforming revenue expectations with 121% year-over-year growth to $132.4 million. The revenue growth was primarily driven by increased launch frequency and efficiency, with a record 16 Electron launches, a 60% increase over the previous year. Strategic multi-launch contracts from commercial and governmental sectors also contributed to this growth. Despite this, earnings per share were relatively flat compared to the same period the previous year. Notably, the company showed improvement in its operating losses, reducing to $29.5 million from $34.2 million, despite facing increased operational costs.
Looking forward to Q1 2025, Rocket Lab predicts revenue earnings between $117 million and $123 million. The company expects to maintain gross margins between 30% and 32% while projecting an operational expense between $77 million and $79 million.
Analysts Adjust Price Targets
Analysts following the company have been constructive on the stock, though several have responded to the recent earnings report by tempering expectations. For example, Stifel and Roth MKM have both maintained a Buy rating on the shares yet lowered their price targets for shares of RKLB to $27 and $25, respectively, on disappointing Q1 guidance and a minor delay in the Neutron timeline to the latter half of 2025.
Regardless, both firms see the potential dip as an opportunity for investors, anticipating growth will pick up again in Q2 and increase speed in H2. They also highlighted the future impact of the company’s low-cost, mass-producible satellite, regarding it as potentially transformative for the industry.
Rocket Lab is rated Moderate Buy overall, based on the recent recommendations of 10 analysts. The average price target for RKLB stock is $25.72, representing a potential upside of 25.52% from current levels.
